January 28, 2010 / 11:07 AM / in 8 years

UPDATE 1-HK's Li & Fung in $2 bln sourcing deal with Wal-Mart

* Sees deal as long-term strategy, expected to grow strongly

* European business on track for three-year plan (Adds details)

HONG KONG, Jan 28 (Reuters) - Consumer goods exporter Li & Fung Ltd (0494.HK) said it has entered into a sourcing agreement to supply Wal-Mart (WMT.N) with goods valued at $2 billion in the first year, and expected to grow after that.

“It is expected that the group will benefit from the sourcing arrangement described through an enhancement of profitability,” Li & Fung said in a statement to the Hong Kong Stock Exchange on Thursday.

Li & Fung said the sourcing arrangement was non-exclusive and did not contain any sourcing volume commitments by Wal-Mart, the world’s largest retailer.

“This is a long-term strategy deal that will grow strongly over the next four to five years,” President Bruce Rockowitz told Reuters in a telephone interview after the announcement.

He added that the company was making “good money” from its European onshore markets in 2009.

“The European business is right on track for the three-year plan,” he said.

    Li & Feng said it was aiming to post annual turnover of $20 billion and a core operating profit of $1 billion under its current three-year plan for 2008-2010. [ID:nHKG351902]

    The company previously said it was relying on acquisitions and new outsourcing deals like the one with Wal-Mart to meet its targets.

    Li & Fung posted turnover in the first half of 2009 of about $6 billion. It has not reported its full-year results for 2009.

    Wal-Mart was already among Li & Fung’s clients, which include other major retailers such as U.S. store operator Target (TGT.N)

    For statement please click here

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